How to Create a Tax Shelter With Life Insurance Contracts

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You can create a tax shelter with life insurance in a very specific way. Find out how to create a tax shelter with life insurance with help from a dedicated insurance professional in this free video clip.

Part of the Video Series: Insurance Help
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Video Transcript

Hi my name is Doug Levi. I'm principal agent and owner of Strategic Insurance Services. And today I'm going to talk to you about tax shelters and life insurance. The first thing I want to let you know off the bat is I would recommend contacting your CPA or your tax adviser. I am not a tax adviser. I don't give tax or legal advice. I want to give you some general, very broad guidelines on life insurance though, and some of the advantages that it does have. The first, and probably the biggest is the cash value that accumulates is going to be tax-deferred. So what does that mean? Well, let me give you an example. Let's say I've got a permanent life insurance policy and this is only going to happen with permanent life insurance. Term life insurance accumulates no cash at all. But say I have a permanent life insurance policy. I'm contributing $200 every month into that. And over time my cash value is accumulating. And let's say over time it's accumulated 15, 20, 30,000 dollars. Well the whole time while it's been growing I have not been taxed on any accumulating gains. Depending on the type of policy, depending on the contract terms, you might see anywhere from 3-5 percent in that cash value account per year. Now if it's a variable life insurance policy the underlying cash value is going to be tied to the stock market. You might see even higher gains per year. You might see 10-12 percent. Of course we know, with always with the stock market, sometimes that goes down. So you could see that number go down a little bit. But the concept here I want you to take away is that the money that sits in that cash value account, much like a 401K, is going to grow tax-deferred. So as I'm accumulating gain, it's not taxed. This has been How Does Life Insurance Grow Tax Deferred in a Life Insurance Contract. My name is Doug Levi. I'm principal agent and owner of Strategic Insurance Services.


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